Michael. Always enjoy your comments and your years of great experience and dedication to the communities you have been in. Nothing to add other than, sadly as with education, cities like LA and SF have never been able to stay ahead of their traffic and growth issues. I am in Nashville, and our interstates are finally in decent shape, but it is certainly disappointing that our “leadership” only adds one lane when they should add more and realize the overall cost savings and better management of growth. Never in my lifetime will that smart thinking happen. As I move toward retirement, I don’t recognize “my” hometown. We have 30-40 new skyscrapers going up. There is construction on every block and it literally changes over night, but I love this city and growth is better than the opposite. I think my wife and I will move to a smaller town a county away, but I cannot imagine being too far away from entertainment and a great restaurant scene. It will be interesting to see how we fare compared to what you have experienced.
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And KSUR's next move: All Classical
- Thread starter davideduardo
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Michael. Always enjoy your comments and your years of great experience and dedication to the communities you have been in. Nothing to add other than, sadly as with education, cities like LA and SF have never been able to stay ahead of their traffic and growth issues. I am in Nashville, and our interstates are finally in decent shape, but it is certainly disappointing that our “leadership” only adds one lane when they should add more and realize the overall cost savings and better management of growth. Never in my lifetime will that smart thinking happen. As I move toward retirement, I don’t recognize “my” hometown. We have 30-40 new skyscrapers going up. There is construction on every block and it literally changes over night, but I love this city and growth is better than the opposite. I think my wife and I will move to a smaller town a county away, but I cannot imagine being too far away from entertainment and a great restaurant scene. It will be interesting to see how we fare compared to what you have experienced.
All of this hasn't even begun to factor what COVID will do to all off these places.
You had people moving to low tax states, and at the time there was an economy that produced local jobs. Not any more.
So now you have a lot of new residents who are unemployed applying to the state for unemployment, from states that don't have deep reserves.
At the same time, these new residents are getting sick with Covid, and they've moved in many cases to states that opposed Obamacare, so those states don't have the kind of healthcare those new residents are used to and require.
So remember all that poverty and overcrowding that people wanted to escape? Guess where it has now moved.
This is why some people are very concerned that a lot of states (mostly red ones) will either have to raise taxes next year or go bankrupt.
You had people moving to low tax states, and at the time there was an economy that produced local jobs. Not any more.
So now you have a lot of new residents who are unemployed applying to the state for unemployment, from states that don't have deep reserves.
At the same time, these new residents are getting sick with Covid, and they've moved in many cases to states that opposed Obamacare, so those states don't have the kind of healthcare those new residents are used to and require.
So remember all that poverty and overcrowding that people wanted to escape? Guess where it has now moved.
This is why some people are very concerned that a lot of states (mostly red ones) will either have to raise taxes next year or go bankrupt.
How do “blue states” with Obamacare and high taxes survive when their higher income populations decrease and even more businesses and jobs are gone or reduced by the double whammy.
I think Nashville will be okay in a year. Tennessee, as a state, hard to say, but probably ok. How do you think cities like Seattle, New York and Chicago will fare by comparison. One thing is for sure, gas prices will rise, food costs may also, and there will certainly be some interesting tax hikes that may well redistribute populations. The road ahead is certainly without a good roas map.
The same way a well-planned stock portfolio survives a crash: Diversification. The bigger states have more diverse revenue streams.
So California is in the positive? I am not sure, as I don’t study that info. Funny, dumb ole Tennessee has a ton of reserve money and rainy day funds. If tourism and the economy can’t get back on track here, then I worry about it everywhere. Interesting comment, BigA. I have not thought about this issue. Intriguing discussion. Not disagreeing, btw.
On a more tragic-comedy note: wasn’t diversification the magic promise that led to TCA 1996? The more stations and markets a corporation could have, the better chances of revenue streams? We all see how that has played out. Government is better than Cumulus and IHeart? Uh-the-hell-Oh. You may be right. Thank God we didnt have a Dickey for president. Back to our previously scheduled trashing of Saul, so David and Frank don’t take us to the principals office. Saul is a moron for being diversified in something profitable. Wine. Need I say more.
On a more tragic-comedy note: wasn’t diversification the magic promise that led to TCA 1996? The more stations and markets a corporation could have, the better chances of revenue streams? We all see how that has played out. Government is better than Cumulus and IHeart? Uh-the-hell-Oh. You may be right. Thank God we didnt have a Dickey for president. Back to our previously scheduled trashing of Saul, so David and Frank don’t take us to the principals office. Saul is a moron for being diversified in something profitable. Wine. Need I say more.
Radio is radio. It's not diversification to own more of the same business. Owning more blacksmith shops won't get people to buy horses. The real problem with TCA 1996 is we saw fewer diverse owners in radio, such as insurance companies or electronics companies, and more companies that ONLY owned radio. THAT was the problem.
Why are radio companies that specialize in radio a problem? Why is an electronics company owning radio stations better? Would you want radio people running electronics companies?
Diversification. Same reason why you diversify your retirement options. Back when RCA owned NBC, they hired top quality radio people and paid them well. Same with Nationwide insurance. Same with General Electric. Consider KCSN. It's owned by Cal State. What kind of people run KCSN? Same with KKJZ. Owned by a university, run by Saul Levine. Radio companies that only own radio stations run into problems when advertising dries up, as is the case now. If you only have one revenue stream, and it goes away, you're stuck.
Your investment portfolio and the collective ownership of an industry are entirely different things. You diversify your investment portfolio to spread risk among various owned assets so that one or a few over weighted investments or investment areas kills your portfolio. There is no such risk across an entire industry measured as a collective whole.
There is also no corresponding logic that says it is a good thing that insurance executives run radio stations. You argue all the time that (essentially) "we are the professionals, we know best, we give the public what they want because that is what we are trained to do", but now you turn around and argue the other side? What makes you think an insurance company can run radio better than iheart?*
I know for sure I don't want radio people running airlines, insurance, medicine, and agriculture. I equally don't want executives from the airlines, insurance, medicine and agriculture running the stations on my radio dial. By the way, airlines are having financial difficulties too. How safe do you think your radio job would be when the airline that owns your station can't get fares for its flights?
*Well, I will spot you on one point. Insurance companies wouldn't grossly overpay for stations acquired in huge over-levered mega-acquisitions at the top of the market, and lade the whole company with debt that they can never service. Only a professional radio company can achieve that feat.
No one ever said the insurance executives were running radio stations. They just owned them, and hired broadcasters to run them.
This may come as a shock to you, but at one time CBS owned the New York Yankees. I promise you that Bill Paley never played first base.
Maybe you heard of Don Lee? He was primarily a car dealer. But he also owned some radio stations in LA at one time. Same with Earl C. Anthony.
Diversification means you own a wide range of things. It doesn't mean you also run them. There's a difference.
Tibbs4: The problem with taxation is government waste and inefficiency. I know a guy who votes against literally every bond issue or tax increase because he hates how much of it gets wasted in the process of building the schools, improving the roads and replacing the 100-year old gas and water mains. To him, it somehow makes more sense for the tank to run dry than it does for it to leak (or in some cases, be siphoned) while keeping the machinery running.
True that L.A. and the Bay Area have issues. But I guarantee (again, from experience) that lower tax rate states are in an even worse position to manage their growth and especially if a catastrophe strikes.
ChannelFlipper, having worked for both companies, I promise you Nationwide Insurance ran the 17 stations that they owned until 1998, which are now iHeart stations, better than iHeart has and is.
The Telecommunications Act did what it was designed to do. Commercial radio was a money losing venture in 1991. Duopoly and the Telecommunications Act helped clusters operate at a profit, which a majority of stations couldn’t do beforehand.
Clear Channel was generating an operating profit prior to the Great Recession and prior to a private equity firm overpaying for it. Cumulus wasn’t as well run but ultimately ended up in bankruptcy because the Dickeys gave their company away, and one of those investors decided it wasn’t getting its money back as quickly as it wanted. Neither had many clusters that were losers.
Where the Telecommunications Act went wrong was that it was a major cause of station prices going into the stratosphere and didn’t have enough ways to check that. At some point, someone overpaying by way too much was probably inevitable. Maybe it really was a matter of kicking the can further down the road, and checking that almost limitless expansion would’ve come at the expense of operating profits. Reasonable people can disagree with the methods, but radio was in trouble in 1991, and duopoly and, later, the Telecommunications Act were the solutions to the troubles created by Docket 80-90. In the accounting world, operating profit (loss) is one line while debt service is a second one. The Telecommunications Act was designed to fix the former; it exacerbated the second. Your total profit (loss) is the sum of multiple lines on a balance sheet.
It isn't the role of the government to set prices. It's the role of the marketplace. The marketplace is what drove up radio prices.
Historically it began in the 80s with investment firms such as KKR, Bass, and others providing the capital for radio purchases.
When people talk about companies "overpaying" for radio, it was all based on supply and demand. The buyers paid what the marketplace demanded at the time.
Look at the two early and "biggest" stations in Nashville... WLAC and WSM.
Or go to Toledo where the owner of a gasoline company, Fort Industries, bought WSPD and created Storer Broadcasting with an enviable portfolio of radio and TV stations.
WLW among many stations was owned by a radio receiver manufacturer. NBC was formed by RCA to promote the sales of radios. General Electric and Westinghouse had among America's premiere radio stations.
The most common cross-ownership was from the newspaper business. Then there was the World's Largest Store with now-memorable initials. One of the Belks in the Southeast had a collection of stations. Several oil companies in Texas had stations, and one of the regional airlines had a batch of FMs in California.
In other words, radio and, thus, broadcasting, have a long association with other kinds of businesses. In some cases, the goal was image and promotion such as with the insurance companies, stores and radio manufacturers. In others, it was a brand extension such as with newspapers. So there is nothing new or unusual about business diversification.
And often, a larger and more structured business has better internal systems. That played an important part in making radio commercially successful in its early days, when many entrepreneurs with no business sense came and went in the radio industry.
Heck, the father of formatted music radio, Todd Storz, was brought up to be a beer brewer and the beer money bought him what became the world's first Top 40 radio station.
Personal sidebar:
Herbert Evans ran Nationwide's broadcast division, going back to the 50's when it was Peoples Broadcasting based at WRFD, a daytimer in Columbus, Ohio. He was friends with my grandmother through the National Conference of Christians and Jews where she was a director or something similar.
I and wanted to spend a year somewhere in Latin America while in High School. Evans agreed to meet with me in Columbus, and I drove down and he spent an hour with me. As a result, I ended up in Mexico City, where I played hooky instead and interned at a radio group.
So you think any group operator today would take the time to meet with a crazy kid?
Radio was better when that kind of company owned stations and not investment bankers and venture capitalists.
Or in the case of Earl C. Anthony and Red McCombs, selling cars. Radio created an image, and that image was a powerful seller.
In my view, when radio companies were able to get financing from investment companies or the stock market, it removed that direct connection with products, and left stations vulnerable to fluctuations in the marketplace.
These comments are all great.
BigA - I am not trying to "trap you" on this comment, but rather just take your perspective and ask for more thoughts. Are saying that when radio went away from "local ownership" and/or more owners in a market that the prevailing buying insanity that resulted from the marketplace sell off and the available money that allowed companies to grow quickly and pay those multiples was a major (but not exclusive) cause of the issues we face today? Where WOULD radio "be" today had the FCC never approved lifting ownership restrictions? Would the dial sound better and be more healthy, given all the options that would have still come along for listeners? Or even worse because owners could not make profit on owning fewer stations in a market?
The mistake people make is looking at TCA 96 by itself, without considering the 20 years of FCC deregulation that preceded it. It's the domino effect. Ownership deregulation HAD to happen because of Docket 80-90. Too many radio stations, diluting the revenue base, coupled with the explosion of FM in the late 70s and 80s. Owners went from having 10-20% of the market share to less than 5%. It's why many of the major players got out of radio in the 1980s, including RCA/NBC and General Electric. There simply wasn't enough money in it any more.
Where would radio be today? My view is the explosive growth of radio syndication in the 80s and 90s would have taken over content at even more radio stations in the 21st century. No FCC regulations limiting syndicators of program consultants. The fact that radio stations in the late 80s were willing to give up mid-days to syndicated talk shows was the canary in the coal mine. Local content creation was expensive and unprofitable. I believe radio would have quickly become just like TV, with no local content at all except for a few stations per market. The only thing that prevented it was when group owners could create their own in-house syndicated content with voice-tracking, rather than giving up barter. That's where we are now. The biggest casualty of the TCA 96 is independent syndication. Instead it's all in house. TCA 96 didn't create more program consolidation. There was nothing in the Act about content. All it did was make it possible for groups to become their own syndicators and eliminate the middle man.
Take a look at what Saul Levine has done with his two stations. Almost no local talent. Unhosted Christmas music at KSUR. Mid-days at KKGO are hosted for free by artists in Nashville. Evenings and nights are unhosted. That's not because corporate is telling him to operate that way. Imagine if all stations in LA operated the way Saul did. Would that be better for radio?
You can make that argument, and I 80%-90% agree with it. However, one could reasonably argue that the Telecommunications Act was a bailout for those who made foolish investments in stations in the 80’s. My main point, though, was that the bankruptcies of iHeart and Cumulus were 100% predictable, and anti-consolidationists were arguing that 15+ years before either happened. They weren’t clairvoyant; all the bread crumbs were plainly visible. Personally, I've always thought the Telecommunications Act was a better option than letting what would likely have been a large number of stations go dark. It wasn’t a perfect solution, but it was a less bad idea than most of the others people have floated around. The people predicting the bankruptcies of the big consolidators didn’t really offer much of an alternative other than a status quo that already hadn’t worked.
Of course, at the time, Entercom and several other broadcasters were pushing for a rollback, but not a total elimination, of national ownership caps. Hard to say if that would’ve made a difference from a financial standpoint nor will we ever know if it would’ve made for better programming and more diverse viewpoints. The idea of Entercom crusading for small broadcasters seemed a little icky at the time and seems outright laughable now. It was, however, a member of the Coalition for Broadcast Diversity in 1995. Consolidation may have been inevitable and necessary, but, even among broadcasters, there wasn’t widespread agreement on how to implement it when it was proposed.
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